Telefónica changes the rhythm and underpins a major international merger in the midst of the coronavirus crisis. On the day of presentation of the results from January to March, in the first quarter affected by the impact of Covid-19, the Spanish multinational will announce an operation in the United Kingdom thanks to its agreement with Liberty Global to create a land telecommunications giant British.

This operation has a value of 24,000 million pounds, over 27,000 million euros. The negotiations, which would have lasted for five months, conclude in a pact that will allow mobile operator O2, a brand of Telefónica in the United Kingdom, and Virgin's cable network, which is part of Liberty Global, to be merged into a large telecommunications group capable of competing with BT, incumbent on that market, and with a higher share than other companies, such as the native Vodafone.

The synergies expected by the two companies are estimated at around 700 million pounds, that is, about 800 million euros, and that the new company has 50% shared ownership between the Spanish and the British. With this merger, Telefónica would deposit around 5,500 million pounds in cash, about 6,300 million euros, to alleviate its large debt.

Telefónica could thus strengthen its position beyond the British mobile market, in which it is present thanks to O2. There, Liberty Global has a trade mark agreement with Virgin that allows it to use that brand for its telecommunications business. O2's mobile and Liberty Global's fixed services, over a cable network, would allow it to export the same convergent services model that it has been developing in Spain in recent times (combination of services such as mobile, fixed, data and even television) .

"Combining O2, the UK's number one mobile operator, with Virgin Media's high-capacity broadband network and entertainment services marks a turning point in the British market, at a time when demand for connectivity It has never been so high or so critical, "said José María Álvarez Pallete, Executive President of Telefónica. "With Virgin Media and O2 working together, the future of convergence is here today," said Mike Fries, his counterpart at Liberty Global.

This alliance will be announced on the day of presentation of results. The company achieved in the first quarter an attributable net profit of 406 million euros in the first quarter of 2020, which is 56.2% more than the 906 million euros it earned in the first three months of 2019. Telefónica has informed that he is putting aside his financial goals for this year, in the face of the health crisis, but he has confirmed his dividend of 0.40 euros per share.

The operator's revenues stood at 11,366 million euros in the first quarter, which is 5.6% less in reported terms than the 11,979 million euros a year ago. However, in organic terms they reflect a decrease of 1.3% compared to the same period of 2019 .

Gross profit before depreciation (Oibda) stood at 3,760 million euros, 11.8% less in reported terms and 1.7% less in organic. In this way, Oibda's margin decreased 2.5 percentage points reported terms and one tenth in organic, to 33.1%.

Likewise, the company points out that confidence in the flexibility of its business model in the present context, together with the solid liquidity position and the expected resistance of the behavior of its activity, allows them to confirm the dividend announced for 2020 of 0.4 euros per share.

However, the company announces that, due to the significant changes that have occurred in the scenario on which the financial objectives were built and in the general context, as well as the current high level of uncertainty, the financial objectives set for 2020 .

However, it continues to monitor the evolution of the business and manage investment and expenses, focusing on the stability of the Oibdaa-CapEx. In the current context, it expects Obida-CapEx organic year-on-year growth for 2020 from slightly negative to stable, while withdrawing the financial targets in the medium term.

Telefónica CEO José María Álvarez-Pallete said that the crisis had "limited impact" in the first quarter of 2020, in which its four key markets have performed "well in a unique and challenging environment" .

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  • Telefónica
  • Covid 19
  • Coronavirus
  • economy
  • United Kingdom
  • José María Álvarez-Pallete

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EmpresasTelefónica wants to integrate O2 with Virgin in the United Kingdom and compete against BT with you

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